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Saturday, September 2, 2017

Continuation of Delta Air Lines Inc. Covered Calls Position

This is the first of two Covered Calls positions in Delta Air Lines Inc. in the Covered Calls Advisor Portfolio.  The initial position expired at the August 18th, 2017 options expiration.  Yesterday afternoon, a continuation of this position was established by selling 5 Sept 15, 2017 $48.00 Calls at $.66 per share.  The original Aug2017 position closed with the Delta stock price below the breakeven price, so this Sept 15th position is an attempt to repair the losses from the original investment and to salvage a small profit by the Sept 15th expiration date.  A potential result for this Delta position is for a +1.0% absolute return over 45 days (equivalent to a +7.8% annualized return-on-investment) if Delta closes above the $48.00 strike price on September 15th.   


Delta Air Lines Inc. (DAL) -- Continuation of Covered Calls Position
The transactions were as follows:
08/01/2017  Bought 500 Delta Air Lines Inc. shares @ $49.97
08/01/2017 Sold 5 DAL Aug 18, 2017 $49.00 Call options @ $1.50
Note: this was a simultaneous buy/write transaction.
08/18/2017 5 DAL Call options expired with stock price below strike price 
08/21/2017 $.305 ex-dividend
09/01/2017 Sold 5 DAL Sept 15, 2017 $48.00 Call options @ $.66 to continue Delta Covered Calls position

A possible overall performance result (including commissions) would be as follows:
Cost Basis Purchase of 500 shares DAL: $24,243.30
= ($49.97 -$1.50)*500 + $8.30 commissions

Net Profit:
(a) Options Income: +$1,071.70
= ($1.50 + $.66) *500 shares - $8.30 commission
(b) Dividend Income: +$152.50
= $.305 per share x 500 shares
(c) Capital Appreciation (If DAL is above $48.00 strike price at Sept 15th expiration): -$989.95
= ($48.00-$49.97)*500 shares - $4.95 commissions

Total Net Profit (If DAL is above $48.00 strike price at Sept 15, 2017 options expiration): +$234.25
= (+$1,071.70 options income +$152.50 dividends -$989.95 capital appreciation)

Absolute Return: +1.0%
= +$234.25/$24,243.30
Annualized Return: +7.8%
= (+$234.25/$24,243.30)*(365/45 days)

3 comments:

  1. Hi Jeff. I have started reading your blog and am enjoying. Thanks for sharing your experience. Couple of questions.

    Have you ever attempted writing cash secured PUTs followed by CC write if the PUT is exercised? This is AKA the Wheel trade.

    Do you post your overall portfolio returns?

    Thanks again.

    ReplyDelete
  2. Hi Chris,

    Thanks for writing. Starting with CSPs and transitioning exercised Puts into Covered Calls positions is a fine approach. Here is an example of one that occurred earlier this year in that manner with a position in Las Vegas Sands:
    http://coveredcallsadvisor.blogspot.com/2017/03/early-assignment-of-las-vegas-sands.html

    I post the result of each position when it is closed out, but do not track overall portfolio returns. It's a good idea and I'll consider starting to do this at the beginning of next year.

    ReplyDelete
  3. Thanks Jeff. I love the fact you have your trade plan set and stick to it. Well done.

    ReplyDelete